Part 2: Preparing A Financial Plan

The financial plan section of the business plan demonstrates your success and future viability in dollar amounts. It outlines where your business has been, where it is at and where it is going.

If you do not understand the financial data section, contact your accountant to complete this section. You should however, complete the assumption section yourself. This will provide you with a more intimate knowledge of your own financial data and will provide your accountant with the information necessary to prepare your projections.

Financial statements for the last three years provide a perspective from which a lender can draw conclusions about the business and its financial operations. You can prepare the financial statements without a sophisticated accounting system.

Assumptions to projections

The key to making a financial forecast is to get as factual information as possible on the market potential and total costs of your proposed product or service. Always be realistic in making your assumptions.

The projected income statement

An income statement shows the profit and loss performance of a business over a given period, usually a year. It details the business's revenues and expenses over that period.

When you prepare this statement, consider all the factors likely to affect revenues and expenses during the planning period. Include information on the following topics:

• What is your projected sales growth? Consider seasonal trends.

• What about additional expenses, overheads and production costs associated with a projected increase in sales? Examples: Higher sales commissions, increased labour costs, rent for storage space to handle increased inventory

• Have you considered other costs associated with the purchase of any new equipment in addition to the purchase price? Examples: Installation, financing, production, business interruption and depreciation.

• As your accountant for advice on the best methods and rates to use for depreciation and amortization expenses. Of course, you may simply go to a search engine such as bing.com and type in "amortization schedule".

• If new loans are part of your plan, have you considered the added interest expense? Is the projected interest rate reasonable?

Now, to view full, sample financial plans, please click here. These plans include assumptions, cost and financing, 3 year projected incomes statements, cash flow, and balance sheets. Each contain instructions on how to develop each financial statement.

Review the projected income statement with your accoutant or bookkeeper.

Continue to how to prepare an income statement

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